Toyota Gets Time to Win Approval of $1.1 Billion Pact

By Margaret Cronin Fisk and Bill Callahan -
Jun 14, 2013

Toyota Motor Corp. (7203) and lawyers suing
the company were given more time to win final approval of a $1.1
billion settlement of claims that recalls related to unintended
acceleration hurt the value of U.S. customers’ vehicles.

U.S. District Judge James V. Selna, after a hearing today
in Santa Ana, California, granted requests from attorneys for
both sides to provide updated figures about how the money will
be allocated to beneficiaries in the settlement. The judge
scheduled a July 19 hearing for final approval.

“A lot of hard work has gone into this and it’s been a
remarkable effort on the part of everyone,” said Selna, after
attorneys for both sides said they will give financial details
to overcome concerns the judge expressed about the disbursement
of the settlement funds.

The company, based in Toyota City, Japan, recalled more
than 10 million vehicles for problems related to unintended
acceleration in 2009 and 2010, starting with a September 2009
announcement that it was recalling 3.8 million Toyota and Lexus
vehicles because of a defect that may cause floor mats to jam
accelerator pedals. The company later recalled vehicles over
defects involving the pedals themselves.

Final Figures

“This agreement is structured in ways that we believe
provide significant value to our customers and demonstrate that
they can count on Toyota to stand behind our vehicles,” Celeste
Migliore, Toyota spokeswoman, said in an e-mailed statement
after the hearing. “We believe that approval of this
settlement, as amended, is in the best interests of all affected
parties.”

The settlement would resolve the economic-loss portion of
the Toyota sudden-acceleration litigation. Class, or group,
actions were filed on behalf of Toyota owners who said the
company drove down their vehicles’ value by failing to disclose
or fix defects.

“This was a remarkable settlement,” plaintiffs’ attorney
Steve Berman said at the hearing today. “I believe this is the
largest settlement in a U.S. automobile case in terms of the
amounts of dollars and the number of class members.”

Intense Negotiations

The accord “represents two years of intense negotiations
and hard work,” J. Gordon Cooney Jr., a Toyota attorney, told
the judge. Toyota “had very strong defenses to the case” and
was confident of winning if the case went to trial, he said.

“However, we would have faced years of litigation ahead of
us, and the settlement will provide real value to Toyota
customers who are the members of this class,” Cooney said.

Selna agreed in a tentative order yesterday that the accord
was “fair, adequate and reasonable,” while delaying final
approval.

“Certain difficulties in the plan of allocation of the
settlement funds preclude the court’s final approval of the
proposed settlement at this time,” Selna said. “The court
needs to ensure that class members are compensated to the
maximum degree possible.”

Selna said yesterday that the settlement didn’t appear to
precisely address the cost of administrating it. He also
questioned whether more funds should be allocated to class
members and Toyota owners who haven’t filed claims.

Judge’s Concerns

Lawyers for both sides said today that they had agreed on
changes to the allocation of funds to address the judge’s
concerns.

Toyota agreed last year to the accord, taking a $1.1
billion pretax charge against earnings without specifying the
amount going to economic-loss plaintiffs in the cases before
Selna.

The value of the settlement is more than $1.6 billion,
including noncash benefits, plaintiffs’ lawyers said in an April
23 filing seeking approval. The agreement includes $757 million
in cash and $875 million in “non-monetary benefits,” including
installation of brake overrides in eligible vehicles, the
attorneys said.

The economic-loss cases were combined in a multidistrict
litigation before Selna, who is also handling federal personal-injury and death suits related to sudden-acceleration claims.
The personal-injury and death cases remain pending, with the
first federal trial set for November in Santa Ana.

Other Trials

Toyota is facing two other trials in state court later this
year, one next month in Los Angeles over the death of a 66-year-old woman, the other in Oklahoma in October over the death of
one woman and injuries to another. Toyota in January settled the
first federal case that had been set for trial before Selna.

Toyota paid $66.2 million in fines to the U.S. National
Highway Traffic Safety Administration for how some of the
recalls were conducted. The company last year agreed to pay
$25.5 million to settle an investor lawsuit claiming Toyota’s
alleged failure to disclose information on unintended
acceleration problems caused the stock to plunge in 2010.

Toyota didn’t admit any wrongdoing in settling the
economic-loss claims.

Settlement notices were mailed to more than 22.6 million
potential class members, Berman, co-lead attorney for the
plaintiffs, said in an e-mail June 12.

Objections Received

“We have received only 76 objections on behalf of 90
individual objectors,” he said. By June 7, the administrator
for the settlement had received requests from 1,949 plaintiffs
to opt out of the agreement, Berman said.

The proposed accord includes $200 million in attorneys’
fees and $27 million in expenses, according to court papers.

Objections filed with the court protested the amounts
available to individual plaintiffs and the size of the potential
award for attorneys’ fees. Selna said yesterday the objections
were without merit and wouldn’t block final approval.

Under the settlement, Toyota will install a brake override
system in more than 3 million vehicles that were subject to
floor mat recalls, provide $250 million for former Toyota owners
who sold their cars from Sept. 2, 2009, to Dec. 31, 2010, and
provide another $250 million for current owners whose vehicles
are ineligible for brake overrides, according to court filings.

The federal cases are combined as In re Toyota Motor Corp.
Unintended Acceleration Marketing, Sales Practices and Products
Liability Litigation, 8:10-ml-02151, U.S. District Court,
Central District of California (Santa Ana).

To contact the reporters on this story:
Margaret Cronin Fisk in Detroit
at mcfisk@bloomberg.net;
Bill Callahan in federal court in Santa Ana, California,
at Callahan@san.rr.com.